Quest Diagnostics sees Q3 earnings slip despite rise in revenue

Quest Diagnostics, the nation's largest provider of laboratory services, said sales rose 6.5% to $1.9 billion in its third quarter, but quarterly net income fell again because of restructuring and integration costs and an expense-reduction plan.

Net income dropped to $129 million in the third quarter of 2014, compared to $405 million in the same quarter in 2013 when it had reported a $300 million one-time gain on the sale of royalty rights in the third quarter of 2013.

Profit has been down in the first half of the year. Net income fell 19% in the second quarter of 2014, compared to the like period a year ago, and was down 23.5% in the first quarter as well.

The Madison, N.J.-based company said its $1.9 billion in net revenue growth for the third quarter of 2014—compared to $1.7 billion in the same quarter a year ago—was led by higher volume and increased revenue for information services.

“We continued to see improvements in underlying trends in pricing, volume and revenue,” Steve Rusckowski, Quest's president and CEO, said in a statement.

Like other laboratory services companies, Quest is dealing with the impact of lower volumes as patient utilization goes down. It also faces declining reimbursement rates. To offset those changes, some companies, including Quest and Laboratory Corporation of America, are seeking new hospital business opportunities, such as buying and operating hospital laboratories.

During a call with investors, Rusckowski said that testing for hepatitis C and the BRCA cancer genes were areas of company strength. Quest last year began offering BRCA testing.

Quest updated its outlook for the full year, estimating that revenues will increase 3.5%. Previous guidance estimated growth between 2.5% to 3.5%.

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